Yahoo shares tumble in premarket trading with Microsoft out
Shares of Yahoo fell 22 percent in premarket trading as hopes for the once dominant search engine dimmed on the withdrawal of a $43.7 billion bid from Microsoft Corp. over the weekend.
Microsoft cuts Vista prices to urge upgradesYahoo Inc. Chief Executive Jerry Yang is convinced that the company he started in a Silicon Valley trailer 14 years ago was worth more than the money Microsoft Corp. had offered for the Internet pioneer.
Now he may only have a few months to convince Wall Street that his rebuff of Microsoft's takeover bid was a smart move and if he can't, analysts won't be surprised if Yang is either replaced as CEO or forced to consider accepting a lower offer if Microsoft comes knocking at his door again.
"This squarely puts the pressure on Jerry Yang to deliver results and shareholder value," Standard && Poor's equity analyst Scott Kessler said. "You are going to see a lot of shareholders just throwing in the towel because they are going to realize it's going to take awhile for the stock to get back to where it was Friday."
The backlash is expected to begin Monday when Kessler and other analysts believe Yahoo's stock price will surrender most, if not all, of its 50 percent gain since Microsoft made its initial offer Jan. 31. The anticipated sell-off would leave Yahoo's market value hovering around $30 billion.
Yahoo shares tumbled 22 percent, or $6.34, to $22.33 in premarket trading. In Frankfurt, Germany, two hours before trading opened in New York, Yahoo shares fell 18.6 percent to 14.74 euros ($22.79).
Microsoft's shares rose 4.3 percent, or $1.26, to $30.50 in premarket trading Monday. The shares had declined 10 percent to $29.24 since the bid, reflecting concerns that the proposed marriage would turn into a complicated mess that would enable Google Inc. to grow even stronger.
Yahoo shares finished last week at $28.67, slightly less than the $29.40 per share that Microsoft was offering before Chief Executive Steve Ballmer agreed to raise the offer to $33 per share in a last-ditch effort to get a deal done.
Disillusioned shareholders are bound to question whether the rejection of Microsoft's sweetened offer was driven more by emotion and ego than sound business sense.
"Clearly there's frustration," said Darren Chervitz, co-manager of the Jacob Internet Fund, which owns Yahoo stock. "I am not even sure if Yahoo cares about its shareholders because they didn't show much regard for shareholders' best interests in this process."
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